iQIYI, Inc. Announces the Results of the Repurchase Right Offer for Its 4.00% Convertible Senior Notes due 2026

Rhea-AI Summary

iQIYI, Inc. (Nasdaq: IQ), a leading Chinese online entertainment video service provider, has announced the results of its repurchase right offer for its 4.00% Convertible Senior Notes due 2026. The offer, which expired on July 30, 2024, resulted in US$395,450,000 aggregate principal amount of Notes being validly surrendered. The total Repurchase Price, including principal and accrued interest, amounts to US$397,471,188.84.

The Company has forwarded the Repurchase Price to Citibank, N.A., the paying agent, for distribution to the Noteholders who exercised their repurchase right. Following the settlement, only US$157,000 aggregate principal amount of the Notes will remain outstanding, subject to the existing terms of the Indenture and the Notes.

Positive

• Successful completion of the repurchase right offer for Convertible Senior Notes
• Significant reduction in outstanding debt, with only US$157,000 principal amount remaining

Negative

• Large cash outlay of US$397,471,188.84 for the repurchase, potentially impacting liquidity

Insights

Financial Analyst

iQIYI's repurchase of a significant portion of its convertible notes is a strategic move that warrants attention. The company has successfully retired $395.45 million of its $395.61 million 4.00% Convertible Senior Notes due 2026, representing 99.96% of the outstanding principal. This action has several implications:

• Debt Reduction: By repurchasing these notes, iQIYI has substantially reduced its long-term debt obligations. This could improve the company's balance sheet and financial flexibility.
• Interest Savings: The repurchase will result in lower interest expenses going forward, potentially boosting profitability. The annual interest savings could be around $15.82 million (4% of $395.45 million).
• Equity Dilution Prevention: By retiring these convertible notes, iQIYI has eliminated the potential dilution that would have occurred if the notes were converted to equity in the future.
• Cash Utilization: The company used $397.47 million in cash to complete this transaction. Investors should consider how this impacts iQIYI's liquidity position and whether it affects the company's ability to invest in content or technology.

While this move strengthens iQIYI's financial position, it's important to monitor how the company leverages this improved balance sheet to drive growth and profitability in the competitive Chinese streaming market.

Market Research Analyst

iQIYI's decision to repurchase nearly all of its convertible notes sends a strong signal to the market about the company's financial strategy and confidence in its future. Here's what this move tells us about iQIYI's position:

• Financial Strength: The ability to repurchase 99.96% of the notes indicates that iQIYI has significant cash reserves or access to capital. This financial strength is particularly noteworthy in the current challenging economic environment for Chinese tech companies.
• Management Confidence: By choosing to use cash to retire debt rather than for other purposes (like content acquisition or technology investment), management is expressing confidence in the company's ability to generate sufficient cash flow for operations and growth without needing this capital buffer.
• Investor Sentiment: The high participation rate in the repurchase offer (99.96%) suggests that noteholders preferred cash over the potential upside of conversion. This could indicate some skepticism about iQIYI's near-term stock price appreciation potential.
• Market Positioning: With a stronger balance sheet, iQIYI may be better positioned to compete against rivals like Tencent Video and Youku. The company could potentially use its improved financial flexibility to invest more aggressively in content or technology, which are critical differentiators in the streaming industry.

Investors should watch for iQIYI's next moves, particularly in terms of content investments and subscriber growth strategies, to see how the company leverages its improved financial position in the competitive streaming landscape.

BEIJING, Aug. 01, 2024 (GLOBE NEWSWIRE) -- iQIYI, Inc. (Nasdaq: IQ) (“iQIYI” or the “Company”), a leading provider of online entertainment video services in China, today announced the results of its previously announced repurchase right offer relating to its 4.00% Convertible Senior Notes due 2026 (CUSIP No. 46267XAE8) (the “Notes”). The repurchase right offer expired at 5:00 p.m., New York City time, on Tuesday, July 30, 2024. Based on information from Citibank, N.A. as the paying agent for the Notes, US$395,450,000 aggregate principal amount of the Notes were validly surrendered and not withdrawn prior to the expiration of the repurchase right offer. The aggregate amount of the repurchase price of these Notes (including the aggregate principal amount of the Notes plus accrued and unpaid interest) (the “Repurchase Price”) is US$397,471,188.84. The Company has forwarded cash in payment of the Repurchase Price to the Paying Agent for distribution to the Holders that had validly exercised their repurchase right. Following settlement of the repurchase, US$157,000 aggregate principal amount of the Notes will remain outstanding and continue to be subject to the existing terms of the Indenture and the Notes.

About iQIYI, Inc.

iQIYI, Inc. is a leading provider of online entertainment video services in China. It combines creative talent with technology to foster an environment for continuous innovation and the production of blockbuster content. It produces, aggregates and distributes a wide variety of professionally produced content, as well as a broad spectrum of other video content in a variety of formats. iQIYI distinguishes itself in the online entertainment industry by its leading technology platform powered by advanced AI, big data analytics and other core proprietary technologies. Over time, iQIYI has built a massive user base and developed a diversified monetization model including membership services, online advertising services, content distribution, online games, IP licensing, talent agency, online literature, etc.

For further information, please contact:

Investor Relations
iQIYI, Inc.
ir@qiyi.com

FAQ

What was the total amount of iQIYI's (IQ) Convertible Notes repurchased in July 2024?

iQIYI (IQ) repurchased US$395,450,000 aggregate principal amount of its 4.00% Convertible Senior Notes due 2026 in July 2024.

How much did iQIYI (IQ) pay in total for the repurchase of its Convertible Notes?

iQIYI (IQ) paid a total Repurchase Price of US$397,471,188.84, which includes the principal amount and accrued interest on the repurchased Notes.

What is the remaining outstanding amount of iQIYI's (IQ) Convertible Notes after the repurchase?

After the repurchase, US$157,000 aggregate principal amount of iQIYI's (IQ) 4.00% Convertible Senior Notes due 2026 will remain outstanding.

When did iQIYI's (IQ) repurchase right offer for its Convertible Notes expire?

iQIYI's (IQ) repurchase right offer for its 4.00% Convertible Senior Notes due 2026 expired at 5:00 p.m., New York City time, on Tuesday, July 30, 2024.